David on IT Outsourcing in China: [news] Special Reports, Advice, ITO Tidbits & an Announcement

Friday, July 23, 2004

Dateline: China

A few special reports to mention. The current (15 July) issue of CIO Magazine has a cover story on ITO (IT outsourcing) titled, "Outsourcing World Tour 2004" (cute title). A clickable map covers countries not usually on the short list for ITO, including Chile, South Africa and Thailand. Covers BPO as well. See http://tinyurl.com/676sh .

Not for everyone, but Washington Technology has a special report on new defense opportunities titled, "Warfare 2.0". Great report with lots of details. Includes info about "Starlight" (an XML-based 3D visualization tool), DoD's "Global Information Grid" and a bit of G2 on DARPA's Information Exploitation Office. (Remember, it was DAPRA's predecessor, ARPA, who funded the creation of the Internet.) See http://tinyurl.com/6jw43 .

For American firms pondering their China strategy, a "2004 Special Edition" of The McKinsey Quarterly features an article titled, "A Guide to Doing Business in China." Good advice and shatters many myths, although not specific to ITO. See http://tinyurl.com/43rak .

On a somewhat related topic (albeit focused a bit more on BPO than ITO), Accenture has published "Executive Survey Results" in a report titled, "Driving High-Performance Outsourcing: Best Practices from the Masters." This seven page PDF report attempts to "provide a snapshot of the choices and challenges facing newcomers to outsourcing:
Ã¢ÂÂ¢ "What timeline can we expect, and what kind of partner
do we need?"
Ã¢ÂÂ¢ "Which processes should we outsource, and which should
we keep?"
Ã¢ÂÂ¢ "How do you structure the deal to allow for changes in the
business environment over the course of the arrangement?"
Ã¢ÂÂ¢ "Can you outsource a business function whose processes are
broken, or do you need to fix it first and then outsource?"
Ã¢ÂÂ¢ "How does an outsourcing arrangement impact our
relationship with unions?"
Ã¢ÂÂ¢ "We have projects going all the time; how do you juggle
all those projects and introduce outsourcing without the
disruption?"

One finding: "A majority (59 percent) use risk/reward incentives to spur high performance from their outsourcing partners. Incentives may
be used to reward extraordinary performance or to encourage
higher levels of risk." For more, see http://tinyurl.com/49rk4 .

Take This to the Bank: Advice for SIs in China

Announcement: CISIS Outsourcing Business Development Forum Presentation

I will be giving a presentation on IT outsourcing market opportunities during next Thursday's CISIS Outsourcing Business Development Forum. The CISIS (China International Software & Information Service) Fair begins next Wednesday morning (the 28th) and goes through Friday. See http://www.cisis.com.cn for more information.

I will be in Dalian from Wednesday afternoon through Friday evening. If you are planning to attend this event or are based in Dalian and would like to get together, please let me know. I am keeping Friday open for meetings, although it's filling up fast. Also, there is a reception (of sorts) on Wednesday night on the 3rd Floor at the Shangri-La beginning at 19:00; I'll be at the "reception" for at least the first hour. I look forward to seeing many of you next week!

ITO Tidbits

From the mouth of Infosys' COO, "In terms of infrastructure, China scores higher than India." (From a Networld World supplement on outsourcing; see http://tinyurl.com/4uglp .) From the marketing veep at Silicon Valley-based Sygate, "The cost structure is pretty spectacular; it's about one-eighth that of the U.S." Sygate is similar in structure to Achievo: U.S. headquarters with most of the development work done in China. (Achievo is one of the few firms that should be on just about everyone's short list.)

And how about this: "Gartner has claimed China could overtake India's outsourcing crown by 2007 with its 2,00,000 (sic) software professionals and a booming domestic software market with spending on IT increasing by 20 per cent per year since 1999." A couple of grammatical errors, but an interesting remark from Gartner. (The grammatical errors are likely the responsibility of the publisher, not Gartner.) See http://shorl.com/dudruhufaledre .

On the "downside," a look at ITO's "hidden costs", in CIO Australia. See http://tinyurl.com/6odc9 . Nothing terribly new, but a good case study.

For some advice on how to manage the seams between multiple outsourcing relationships, see http://tinyurl.com/6qdkv . THIS IS A STICKY ISSUE, especially since many of China's larger SIs want to sub-contract (in essence, further outsource) to smaller SIs. Frankly, I'm a bit suspicious about this: It requires a lot of faith from an American client. It's the "I barely know YOU, and I have NO CLUE who these other guys are" problem. Sounds like a one-way ticket to getting fired for an American IT exec.

A bit of common sense from an IDG news blurb. Talks about sending out RFPs to about 50 companies, a small trial project, and the need for collaboration technology. See the IDG piece at http://tinyurl.com/2etll .

Finally, "(i)n a survey of top decision makers on corporate outsourcing policies, 59% said they expect to increase their outsourcing budget by 20% or more in the next 18 months." Also, the so-called outsourcing debate has had little impact on outsourcing decisions and "lost knowledge" was cited as the key workforce-related risk. See the Patni press release at http://tinyurl.com/54869 . It's also a pretty good example of the right way to issue a self-serving press release.

Cheers,

David Scott Lewis

President & Principal Analyst

IT E-Strategies, Inc.

Menlo Park, CA & Qingdao, China

e-mail: click on http://tinyurl.com/6xeue

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